Ethereum volatility is expected after the Merge – What else can happen?

The Mergeis expected to change a lot of things in the second largest blockchain. As the Merge date is closing in, the risk of Ethereum volatility is also increasing.

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Jay Crypto

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Last updated Sep 14, 2022 at 9:04 PM

Posted Sep 14, 2022 at 8:00 PM

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Ethereum’s D-Day is near. Let’s explore what things will change after the Merge and how the price of the asset may behave. But first let’s examine the current state of the market. 

Current Market Scenario

We are now just one day and a few hours away from the big day for the second largest network. There’s a risk of Ethereum price volatility during and after the Merge as whales have already set their things.  The price of the asset has taken a nosedive and plunged more than 5% over the last 24 hours. Surprisingly, the asset has added more than 20% in its 24h trading volume. Data from CoinMarketCap shows that asset investors are taking interest in this big event, but things can get messy. Over the past 24 hours, investors have already lost millions of dollars.  

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    CoinMarketCap

Leading blockchain explorer OKLink has released some information about the Beacon Chain PoS method that is currently being used on the Ethereum Mainnet. The system merge of the two systems was 99.75% finished at the time of publication. The upgrading to Paris represents the full changeover. The Terminal Total Difficulty (TTD) of 58750000000000000000000 will also initiate the upgrade.

Let’s see what changes the Ethereum network will see after the Merge . 

What Will Change After Merge?

Some potential consequences of the switch to a PoS consensus mechanism on the Ethereum mainnet were addressed in recent research by IntoTheBlock. The paper states that one notable effect of this change is that after the Merge, the amount of ETH issued to each block will fall by 85% to 90%. This drop will have the same impact as "three Bitcoin halves all at once."

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 IntotheBlockchain Report

Additionally, IntoTheBlock predicted that the market's supply of ETH would decline. This is a result of a decrease in the issuance of ETH and the network's reduced requirement for miners as a result of the Merge. According to the research, the market will be relieved of $20 million to $25 million worth of price pressure based on the present rewards given to existing miners.

Of course, all ETH staked before the Merge will remain unaltered until the following Shanghai upgrade. This will further limit the inflow of ETH supply. The drop in ETH issuance, nevertheless, won't last forever. The quantity of ETH is anticipated to progressively rise "as more ETH is staked leads to increased emissions even if these emissions are negative."

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 IntoTheBlock

Additionally, IntoTheBlock thinks that ETH will see a minor deflation after the Merge since supply will "temporarily reduce" when the Merge is finished. It was also mentioned that transaction fees on the Ethereum network may increase in the days following the Merge, as the event will boost ETH price volatility. Additionally, market speculation could "burn more ETH in the process."

Let’s look at the technical side of the asset to understand how volatility can impact the price of the asset. 

What’s Next?

In the coming week, Ethereum is prepared to break past a significant barrier level. The biggest alternative coin by market capitalization  took a nosedive, falling more than 6% in the previous day, and was trading at $1,750. However, as Ethereum gets ready for the Merge, its weekly increases are still in the double digits. The Ethereum community is becoming more optimistic that the token will finally overcome the $1,800 barrier in light of recent progress. There is, however, one significant additional issue.

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TradingView

The asset is coming to retest its major support, but there are more chances of price volatility because the whales are already active in the ecosystem. Several experts have also suggested that the price swings of ETH may be pretty lethal for traders. 

Conclusion

Ethereum is a great asset with huge potential to alter several things in the entire crypto market. Users must be aware that Ethereum can face extreme volatility, so act cautiously. Not financial advice. DYOR!!!

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